Resources Frequently Asked Questions

A blockchain is a decentralized database that records transactions across a network of computers. Unlike traditional databases, where a central authority controls data, blockchain operates on a distributed and trustless network, enhancing transparency, security, and data integrity. Once a record has been added to the chain it is very difficult to change. To ensure all the copies of the database are the same, the network makes constant checks. Blockchains have been used to underpin cryptocurrencies like Bitcoin, but many other possible uses are emerging, such as the tokenization of illiquid assets. 

Blockchain's immutability is a cornerstone of its design, ensuring that once data is recorded on the blockchain, it becomes nearly impossible to alter or delete. This attribute is achieved through cryptographic hashing, where each data block contains a unique fingerprint (hash) of the previous block. Any attempt to modify a single block would require recalculating the hash for that block and all subsequent blocks, which would need the consensus of the majority of the network. This consensus mechanism, coupled with the distributed nature of the blockchain, makes unauthorized changes extremely difficult.
Immutability has far-reaching implications. In financial transactions, it prevents fraudulent tampering with transaction records, ensuring a trustworthy and auditable ledger.y

Smart contracts are automated contracts stored on the blockchain that are triggered once certain criteria have been met. They are working according to the principle “if...then...”. A smart contract could be used in the case where a token is automatically transferred from wallet “A” to wallet “B” as soon as criteria “C” (e.g., receipts of funds) and “D” (released by the issuer) have been met. 
Smart contracts are widely used in asset tokenization to automate the entire process, reduce the role of intermediaries, and associated costs, and eliminate the need to invest additional effort in regulating and managing the entire process, which improves overall efficiency.   

The use of blockchain technology is generally considered very secure due to its decentralized and transparent nature. Its fundamental mechanism, where each transaction is recorded in a block and linked to both preceding and succeeding transactions, creates an immutable ledger. Furthermore, the consensus protocols used in many blockchains make it very difficult for any single user to alter past transactions, adding to its security. 

Blockchain's transparency stems from its public and decentralized nature. All participants in a blockchain network have access to the same information, making transactions and data visible to all authorized parties. This openness builds trust among stakeholders by enabling them to independently verify and audit records without relying on intermediaries or third parties.

Tokenization is the process of recording claims as a digital representation on a blockchain. This can include claims to tangible assets such as art, and real estate, and also financial instruments, such as bonds. These tokens represent ownership of the underlying asset and can be bought, sold, and traded digitally. 

A digital asset refers to any form of digital representation of value that can be owned or controlled by an individual. It encompasses a wide range of items, including cryptocurrencies, digital art, digital collectibles, digital financial instruments, intellectual property, and more. These assets are typically stored and transacted on the blockchain, which ensures their security, immutability, and verifiability. Digital assets have gained significant popularity and value in recent years, offering new opportunities for investment, ownership, and decentralized applications. 

A token, in the context of blockchain and cryptocurrency, refers to a unit of value or digital asset that is created and managed on a blockchain platform. Tokens can represent various types of assets, rights, or functionalities within a specific ecosystem. Technically, “token” is just another word for digital assets.

In finance, tokenization has gained significant traction as it offers several advantages, such as:  
- Fractional Ownership: Tokenization allows assets to be divided into smaller units, enabling fractional ownership. This opens up investment opportunities to a broader range of individuals who may not have the means to purchase entire assets.
- Enhanced Liquidity: Tokenization facilitates the creation of secondary markets for traditionally illiquid assets. By digitizing assets and representing them as tokens, it becomes easier to buy, sell, and trade them on digital exchanges, unlocking liquidity and potentially reducing transaction costs. 
- Streamlined Processes: Tokenization automates several aspects of traditional financial processes, such as the issuance, compliance, and settlement. Smart contracts can be programmed to automatically execute certain actions, such as interest payment, reducing the need for intermediaries and increasing operational efficiency. 

NFT stands for Non-Fungible Token. They represent a unique item, such as art and collectibles , which are not interchangeable with other items because of their unique properties. The blockchain protocol secures its record of ownership. 

Equity tokens are a subset of security tokens, legally equivalent to shares. They represent ownership rights to the shares of a company. In Germany, according to the current legal situation, shares may not yet be issued as equity tokens.  

Utility Tokens are tokens which give access to certain services or products, similar to an admission ticket or a voucher. The majority of previously known crypto tokens issued in an ICO in Germany belonged to this category. They do not constitute securities within the meaning of the eWpG or capital investment within the meaning of the VermAnlG, In many cased, tokens like this are also not financial instruments under the KWG. 

An STO, or Security Token Offering, is a type of fundraising method that involves the sale of digital tokens that represent ownership in an underlying asset or business. They can be used to represent anything, but there is a limited link between the transfer of the token and the right. In Germany, the categorization under the law is not entirely clear; it qualifies as financial instruments under regulatory law/MiFID, but not as securities under safe custody law.  

A digital asset that represents ownership of a tradable asset mapped via a blockchain. In Germany, they have limited negotiability since they are not subject to the good faith buyer protection and have no protection in case of foreclosure and insolvency. 

A digital representation of a financial security recorded on a blockchain. In Germany, they are covered by the Electronic Securities Act (eWpG) and have specific requirements regarding its registrar and custody. They have the same protection and negotiability as paper-based securities.
The German Electronic Securities Act (“eWpG”) made it possible to issue bearer bonds, mortgage bonds (Pfandbriefe), and certain fund units in purely electronic format.

In Germany, the eWpG requires the task of keeping crypto securities register to be supervised by BaFin. For this purpose, lawmakers have defined crypto securities registration as a financial service within the meaning of the KWG.  
NYALA´s subsidiary - Smart Registry GmbH - obtained the preliminary license as a Crypto Security Registrar and therefore all the crypto securities issued via our NYALA Digital Asset Platform are fully regulated and successfully registered in BaFin.  

All of our tokenized securities are fully compatible with the traditional financial ecosystem. Once tokenized, securities are documented in the WM Securities Register, the publicly available register of all issuers covered by WM Datenservice. The WM Securities Repository currently contains over one million financial instruments, traditional paper-based and digitally issued, with no end in sight. Hence, the WM Securities Register covers nearly all of Europe and includes the most popular financial instruments worldwide. 
WM Datenservice also allocates and administers the International Securities Identification Number (ISIN) for the worldwide, unequivocal identification of German financial instruments.

Yes, crypto securities are tradable on secondary markets. The European DLT Pilot Regime offered the possibility for some industrial players to apply for a license to operate a multilateral trading system based on DLT in order to trade tokenized financial instruments.  
NYALA is building the first regulated cross-platform for trading tokenized bonds, structured products, and – soon - equity shares. This ecosystem will allow issuers, crowdfunding platforms, and other relevant players to expand their product offering and provide investors with a pathway to liquidity and marketability for their investments.  
If you want to learn more, have a look at our dedicated page.

With the NYALA Digital Asset Platform, you can easily tokenize your assets. In simple steps, issue a regulated security token, an NFT, or another type of asset, and distribute it among your desired recipients. Schedule a quick call with one of our experts and we will introduce you to the world of digital assets.  

NYALA's advanced custody solution ensures the highest level of security for your digital securities. With cutting-edge features such as multi-signature, our platform deploys bank-level security measures to protect your tokenized assets and sensitive information.

Our platform caters to businesses of all sizes, empowering them to leverage the benefits of tokenizing digital assets. Whether you're a crowdfunding company with multiple investment projects, a real estate firm in search of liquidity, or a global bank looking to expand your product offering, NYALA simplifies the issuance process to just a few clicks.

We are licensed under German Electronic Securities Act (eWpG) to issue fully compliant tokenized securities. We provide you with all the necessary tools and features to comply with legal requirements in your jurisdiction.

Our SDK allows you to easily integrate our tokenization engine into your platform's interface for seamless investor experience.